Reclaiming Common Sense

Existing Home Units Still in Recovery

Last week we received information regarding New Home Construction for the month of January. Today we received information regarding existing home sales data a Friday we will receive information on the New Home Sales data. Last month's existing home sales data revealed a spartan inventory level. We need new inventory for the existing home sales data to soar. The inventory tends to fall after Labor day and improve after the Super Bowl. People want to move between Memorial Day Weekend and Labor Day Weekend so that they have long weekends to get things done and so that their kids do not have to move during the school year. If the average days on market is between - days then people need to list their homes between February 1st and May 31st. Last month's new home sales data was lackluster. If we combine the new home inventory picture (high) and existing home inventory (low) then we have a couple of possible scenarios:

  • Existing home prices will soar due to undersupply;
  • New home sales prices will decline due to lack of demand;
  • People who would normally buy existing homes will be "forced" to buy new homes, clearing some inventory, possibly spurring more development;
  • Existing Home Owners will place their homes on the market for sale at a premium, driving up sales prices.

This Month's data provides some good news, relatively speaking.

The Number of units Sold Exceed 300,000 again - Still not back to 2002 levels. One month does not make a trend. You will be reading that here for the next few months. This was the best January of sales since 2008 - a decade. That may be the headline elsewhere. It was a rough decade. We are still not back at 2007 levels as the housing market was crashing. We are not back to 2002 levels as it was rising. This means that we may have three or more years left in this recovery before we enter into an expansion mode.The average sales price hit an all-time high. This may shake loose some reluctant sellers.

We are at the second lowest level of inventory since January 1999. Last month we were at the lowest level. This month the inventory ticked slightly higher. WE are still seeing fewer homes on the market  than December 1999. If we do not have the inventory then there will not be the same level of sales.

We have a slower annual pace of sales than January 2004-2008. We sold 5.641 million units with the twelve month period ending January of 2004. We sold 5.470 million during the past twelve months. This is 700,000 fewer than January 2005, and 1.5 million fewer units than January 2006 and 2007. The slope of the line indicates that we will not ramp it up as we did during the calendar year of 2005.

Minor revisions to the prior month's data. We saw the average sales price for December raised from $274,000 to $274,900. The median sales price for December was revised up from $232,200 to $233,300 Last month's inventory level was revised down to 3.6 months.

This was a good report. We are seeing improvement in the housing market. It was a disconcerting report because if we do not see an increase in inventory we will not see an increase in sales. If we see constraints on inventory than the buyers will either have to pay more for existing homes or jump into the new home market. We will see what is happening with new home sales this Friday.

It's the economy.